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Getting started: Understanding how the government buys

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The government buys many of the products and services it needs from suppliers who meet certain qualifications. It applies standardized procedures by which to purchase goods and services. That is, the government does not purchase items or services in the way an individual household might. Instead, government contracting officials use procedures that conform to the Federal Acquisition Regulation (FAR). The FAR is a standardized set of regulations used by all federal agencies in making purchases. It provides procedures for every step in the procurement process, from the time someone in the government discovers a need for a product or service to the time the purchase is complete. The FAR can be accessed electronically at www.arnet.gov/far. As of Oct. 1, 2001, the government transitioned from Commerce Business Daily (CBD) to Federal Business Opportunities (FedBizOpps) to "post" all procurement opportunities expected to exceed $25,000. FedBizOpps is a Web-based application and is the government-wide point of entry to communicate its buying requirements to potential suppliers. The Web site can be accessed at www.FedBizOpps.gov. When the government wants to purchase a certain product or service, it can use a variety of contracting methods. Simplified acquisition procedures, sealed bidding, contracting by negotiation and consolidated purchasing vehicles are key contract methodologies used to purchase products and services.

Contracting methods

Simplified procedures The Federal Acquisition Streamlining Act (FASA) of 1994 is intended to simplify government buying procedures. It removed many competition restrictions on government purchases of less than $100,000. Instead of full and open competition, agencies can now use simplified procedures for soliciting and evaluating bids up to $100,000. Government agencies, however, are still required to advertise all planned purchases over $25,000 in www.FedBizOpps.gov. Simplified procedures require fewer administrative details, lower approval levels and less documentation. New procurement reform legislation requires all federal purchases above $2,500 but under $100,000 to be reserved for small businesses, unless the contracting officer cannot obtain offers from two or more small businesses that are competitive on price, quality and delivery. Government purchases of up to $2,500 in individual items or multiple items whose aggregate amount does not exceed $2,500 are now classified as "micro-purchases" and can be made without obtaining competitive quotes. However, these purchases are no longer reserved for small businesses. Agencies can make micro-purchases using a Government Purchase Card (typical credit card).

Sealed bidding Sealed bidding is how the government contracts competitively when its requirements are clear, accurate and complete. An Invitation For Bid (IFB) is the method used for the sealed bid process. Typically, an IFB includes a description of the product or service to be acquired, instructions for preparing a bid, the conditions for purchase, packaging, delivery, shipping and payment, contract clauses to be included and the deadline for submitting bids. Each sealed bid is opened in public at the purchasing office at the time designated in the invitation. All bids are read aloud and recorded. A contract is then awarded by the agency to the low bidder who is determined to be responsive to the government's needs. Government-wide IFBs are available daily for review at www.FedBizOpps.gov. This electronic government service also provides a direct link to the invitation. Contracting officials search the SBA's Procurement and Marketing Access Network (PRO-Net) to identify qualified small business contractors. Therefore, any small business that wants to sell to the government should be registered on SBA's PRO-Net.

Contract negotiation In certain cases, when the value of a government contract exceeds $100,000 and when it necessitates a highly technical product or service, the government may issue a Request for Proposal (RFP). In a typical RFP, the government will request a product or service it needs, and solicit proposals from prospective contractors on how they intend to carry out that request, and at what price. Proposals in response to an RFP can be subject to negotiation after they have been submitted. When the government is merely checking into the possibility of acquiring a product or service, it may issue a Request for Quotation (RFQ). A response to an RFQ by a prospective contractor is not considered an offer and consequently cannot be accepted by the government to form a binding contract. The order is an offer by the government to the supplier to buy certain supplies or services upon specified terms and conditions. A contract is established when a supplier accepts the offer. Government-wide RFPs and RFQs are available daily for review at www.FedBizOpps.gov. This electronic government service also provides a direct link to the request. In most instances, the government uses oral solicitations for purchases less than $25,000, written solicitations for purchases over $25,000, and purchase cards to obtain micro-purchases less than $2,500. One of the most significant changes government acquisition reform is the increased importance of "best value." Best value means that, rather than making awards to the lowest bidder as it generally did in the past, the government can now make awards for the item that best satisfies its needs at a slightly higher price. If purchasers are going to make an award based on best value, they must state their intent in the solicitation document and include a description of the evaluation criteria, award factors, and factors other than the price that will be considered in making a contract award. Contracting officials search the SBA's Procurement and Marketing Access Network (PRO-Net) to identify qualified small business contractors. Therefore, any small business that wants to sell to the government should be registered on SBA's PRO-Net.

Consolidated purchasing programs Most government agencies have common purchasing needs -- carpeting, furniture, office machine maintenance, petroleum products and perishable food supplies are just a few examples. Sometimes the government can realize economies of scale by centralizing the purchasing of certain types of products or services. Acquisition Vehicles - Procurement reform has ushered numerous new and/or modified acquisition vehicles -- multiple award contracts -- such as multi-agency contracts and government-wide acquisition contracts (GWACs). These vehicles encourage long-term vendor agreements with fewer vendors. The use of these contract vehicles, including expanded use of GSA schedules has increased significantly during the last few years. These popular vehicles allow government buyers to quickly fill requirements by issuing orders against existing contracts or schedules without starting a new procurement action from scratch. Further, agencies can competitively award several or multiple task order contracts to different firms for the same products and services. This practice allows federal buyers to issue orders to any one or combination of several firms with relative ease. The three largest interagency consolidated purchasing programs are administered by the General Services Administration, the Defense Logistics Agency, and the Department of Veterans Affairs.

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